Artificial Intelligence in Indian Banking and Financial Services: RBI’s Regulatory Framework and Emerging Opportunities

Abstract

The rapid expansion of Artificial Intelligence (AI) and Machine Learning (ML) technologies is reshaping global banking and financial services. India has one of the world’s largest digital financial system which is growing at a fast pace, hence India occupies a central position in this transformation. This paper studies the trajectory of the adoption of AI in Indian banking sector, analyses the emerging regulatory architecture and highlights the systemic opportunities and challenges. The study adopts a descriptive and analytical research design based on secondary data from authoritative government and quasi government sources. The paper traces adoption trends across public and private sector banks, identifies major use cases across fraud detection, credit assessment, customer service and risk management and critically evaluates the regulatory framework constituted by RBI in December 2024. It has also examined the supportive legislative architecture provided by the Digital Personal Data Protection Act released in 2023 and the IndiaAI mission. The findings presents significant policy implications for the adoption and development of AI under the vision of Viksit Bharat 2047.